Bank of Canada head expected to hold interest rates steady

Canadian dollar nears 8-month high ahead of Bank of Canada rate decision

Canadian dollar nears 8-month high ahead of Bank of Canada rate decision

The Bank of Canada is maintaining its key interest rate as it warns that ongoing "trade tensions" have coloured the global economic outlook. They painted a picture of an improving Canadian economy, but one whose path back to full capacity is being slowed by an escalating trade conflict. The next interest rate announcement is scheduled on September 4, 2019.

"The reason for the drop is perhaps the market may have been bracing for a more hawkish statement that would've put slightly less emphasis on trade and things like this", he said.

Meanwhile, Fed Chairman Jerome Powell reinforced expectations the US central bank will cut interest rates for the first time in a decade at its next monetary policy meeting later this month, saying trade uncertainties and concerns about the global outlook continued to exert pressure on the American economy. "So I think rather than an expanding net interest margin, we would expect it to remain relatively stable, if not compressed a bit".

At 9:05 a.m., the Canadian dollar was trading 0.2 per cent higher at 1.3054 to the greenback, or 76.60 US cents. The two-year CA2YT=RR rose 10.5 Canadian cents to yield 1.583% and the 10-year CA10YT=RR was flat to yield 1.584%. We are anticipating a couple of rate cuts from the Fed.

Wilkins said the bank estimates the combined fallout will lower Canada's gross domestic product by as much as two per cent by the end of 2021. The Bank had already incorporated such negative effects in previous Monetary Policy Reports (MPR) and in this forecast has made further adjustments in light of weaker sentiment and activity in major economies.

Even with the unexpectedly strong rebound, those looking for fresh hints about the timing of the bank's next policy move - hike or cut - will likely have to wait a little longer, several experts say. -China trade war and sluggish inflation.

"Stephen S. Poloz was appointed Governor of the Bank of Canada, effective 3 June 2013, for a term of seven years".

"Following temporary weakness in late 2018 and early 2019, Canada's economy is returning to growth around potential, as expected", reads a statement from the bank, which credited "stronger than predicted" growth in spring partly to the "reversal of weather-related slowdowns...and a surge in oil production".

The central bank's benchmark interest rate has been at 1.75 per cent since last October.

However, it sounded a note of concern about global trade tensions amid the current tiff between the United States and China.

The bank warned that worldwide trade disputes are having a "material effect on the global economic outlook". Oil prices have continued to rebound.Yesterday, API data showed U.S. crude inventories dropped 8.1 million barrels in the week ending July 5.West Texas Intermediate oil jumped to $59.28 U.S./barrel overnight after touching $57.40/b, yesterday.Additional support stems from supply disruption concerns due to elevated U.S./Iran tensions and the Organization of the Petroleum Exporting Countries and Russian Federation decision to extend production cuts until March 2020.